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On 08 August 2019 - US, Europe, Asia up on better Chinese data, more stable yuan

Anne D Picker

Anne D Picker - Econoday

Risk appetite recovers as bond rally tops out.

US markets

Major US stock indexes advanced Thursday as risk appetite recovered on better US and Chinese data, a relatively stable Chinese currency, and a recovery in oil prices. The Dow industrials gained 1.4 percent, the S&P 500 rose 1.9 percent, and the NASDAQ gained 2.2 percent.

Chinese exports bounced back unexpectedly in July, which is easing global recession worries. Worries about a disorderly decline in the Chinese yuan also faded Thursday, as the People’s Bank of China appeared ready to limit the currency’s decline. Upbeat US jobless claims data Thursday underlined ongoing strength in the US labor market.

Equities benefited Thursday from at least a temporary suspension in this week’s big bond market rally. Fixed-income markets may have gotten ahead of themselves in pushing rates sharply lower on recession worries and expectations for aggressive central bank easing. A Reuters report that Germany was considering loosening its stingy fiscal stance added to the positive risk mood. Meanwhile, oil prices rebounded on news Saudi Arabia was looking at ways to end the decline that pushed oil down for three straight days.

Among the best performers were semiconductors and software, chemicals, consumer discretionary especially restaurants and travel. Defensive shares lagged but were still higher.

Among companies reporting, food company Kraft Heinz dropped 8.6 percent after a profits and revenues miss, and news it would delay financial filings in light of accounting trouble. Symantec jumped 12 percent on a report Broadcom, a big software company, is closing in on a deal to acquire the internet security company. Ride-sharing company Lyft gained 2.8 percent on news its revenues exceeded expectations, and a lower than expected loss.

In economic news, latest US jobless claims data showed declines to even more favorable levels, led by a better-than-expected 8,000 dip in new claims to a lower-than-expected 209,000 in the August 3 week. The 4-week average of 212,250 is roughly 5,000 lower than early July, which hints at increasing strength in labor demand.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude rose US$1.39 to US$57.62 while gold fell US$4.80 to US$1514.80. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was down 1 basis point at 2.24 percent while the yield on the 10-year note was up 1 basis point at 1.72 percent.

European markets

European equities rallied Thursday on better sentiment reflecting reassuring economic data from China and relief that the bond market rally had fizzled. The Europe-wide STOXX 600 and the German DAX both gained 1.7 percent, the French CAC jumped 2.3 percent, and the UK FTSE 100 rose 1.2 percent.

China’s trade data showed exports unexpectedly rebounded in July, calming worries about recession that had stoked a big bond market rally earlier in the week. On the currency front, markets were soothed when the People’s Bank of China set its daily yuan fixing at 7.0039 to the dollar, the first time since 2008 it was weaker than 7 but not as high as the market expected and greeted as a sign the PBOC wants to avoid a rapid yuan decline.

Stocks outperforming included trade-sensitive sectors chemicals, technology, basic resources, plus health care. Underperformers included defensive stocks in telecom, real estate, plus real estate and travel and leisure. On a busy earnings day, earnings misses hit Deutsche Telekom, down 0.5 percent, and shoe company Adidas off 2.6 percent. Industrial conglomerate ThyssenKrupp rose 4 percent, and big pharma Merck rose 1.7 percent on earnings beats. Zurich Insurance rose 4 percent after saying it would beat its 2019 earnings targets. Danish brewer Carlsbad was a huge winner, up 11 percent after raising its profits guidance.

Asia Pacific Markets

Most major Asian markets closed higher Thursday after China trade data showed a rebound in exports in June, with Chinese currency moves also still a focus of investor attention. The Shanghai Composite index advanced 0.9 percent on the day, while Chinese authorities set the reference rate for the yuan just above the key 7 level against the dollar, its weakest level since 2008. Australia’s All Ordinaries index and Hong Kong’s Hang Seng index also closed higher on the day, rising 0.8 percent and 0.5 percent respectively. Japanese shares were mixed, with the Nikkei index up 0.4 percent but the Topix index closing down 0.1 percent.

China's trade surplus in US dollar terms narrowed from US$50.98 billion in June to US$45.06 billion in July, larger than the consensus forecast of US$41.9 billion. Exports advanced 3.3 percent on the year in July after falling 1.3 percent in June, considerably stronger than the consensus forecast for a fall of 1.5 percent, while year-on-year growth in imports picked up from a fall of 7.3 percent to a decline of 5.6 percent, also stronger than the consensus forecast for a drop of 8.3 percent. The rebound in headline exports growth was largely driven by stronger demand from the European Union and Southeast Asia, with exports to the United States and Japan falling on the year.

Looking forward

On Friday in Asia/Pacific, Chinese CPI and PPI, and Japanese GDP reports are due. In Europe, the following data releases are scheduled: French industrial production, German merchandise trade, Italian CPI, UK GDP, and UK industrial production. In North America, Canadian housing starts, Canadian labor force survey, and US PPI-FD data will be released.

Global Stock Markets

 

Index

8 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26378.19

371.12

1.4

 

NASDAQ

8039.16

176.33

2.2

 

S&P 500

2938.19

54.11

1.9

Canada

S&P/TSX Comp

16404.53

139.31

0.9

Europe

 

 

 

 

UK

FTSE 100

7285.9

87.20

1.2

France

CAC

5387.96

121.45

2.3

Germany

XETRA DAX

11845.41

195.26

1.7

Italy

MIB

20841.15

302.30

1.5

Spain

Ibex 35

8869

122.90

1.4

Sweden

OMX Stockholm 30

1550.62

22.43

1.4

Switzerland

SMI

9751.55

217.57

2.3

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6642.26

53.73

0.8

Japan

Nikkei 225

20593.35

76.79

0.4

 

Topix

1498.66

-1.27

-0.1

Hong Kong

Hang Seng

26120.77

123.74

0.5

S. Korea

Kospi

1920.61

10.90

0.6

Singapore

STI

3168.94

-15.75

-0.5

China

Shanghai Comp

2794.55

25.87

0.9

Taiwan

TAIEX

10494.49

108.31

1.0

India

Sensex 30

37327.36

636.86

1.7

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.